Chapter 8: Depreciation, Cost Recovery
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Jose' purchased a house for $300,000 in 2011. He used the house for his personal residence. In March 2011, whenthefairmarket value of the house was $250,000, he converted the house torental property. What is Jose's cost recovery for 2014?
45.
Lori, who is single, purchased five-year class property for $31,000 and seven-year class property for $42,000 on May 20, 2014. Lori expects thetaxable incomederived from her business (without regard to the amount expensed under § 179) to be about $100,000.
Lori wants to elect immediate § 179 expensing, but she doesn’t know whichassetshe should expense under § 179. She elects not to take additional first-year depreciation.
a. Determine Lori’s total deduction if the § 179 expense is first taken with respect to the five-year class asset.
b. Determine Lori’s total deduction if the § 179 expense is first taken with respect to the seven-year class asset.
c. What is your advice to Lori?
In 2013, Muhammad purchased a new computer for $16,000. The computer is used 100% for business. Muhammad did not make a § 179 election with respect to the computer. He does not claim additional first-year depreciation. If Muhammad uses the statutory percentage method, determine his cost recovery deduction for 2013 for computing taxable income and for computing his alternative minimum tax.
Martha was considering starting a new business. During her preliminary investigations, she incurred the following expenditures:
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Martha begins the business on July 1 of the current year.
If Martha elects § 195 treatment, the startup expenditure deduction for the current year is
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Rating:
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Solution: Chapter 8: Depreciation, Cost Recovery